Health Insurance Before Medicare: Early Retirement Options

If you retire before 65, your main ways to stay covered until Medicare are a Health Insurance Marketplace plan (with premium tax credits if you qualify), COBRA, Texas state continuation, a spouse's job-based plan, or retiree coverage from your employer. Which one fits depends on your income, how long you need coverage, and whether your employer offers retiree benefits. This guide explains each option, the deadlines that matter, and how to line up the switch to Medicare at 65.

Key takeaways

• Losing job-based coverage when you retire opens a Marketplace Special Enrollment Period from 60 days before to 60 days after your separation date.
• COBRA keeps your same plan, but you usually pay the full premium plus a small fee, and you get no Marketplace savings while on it.
• After the 60-day window, dropping COBRA early does not open a Special Enrollment Period. You wait until COBRA runs out or Open Enrollment.
• For 2026 and later, premium tax credits generally require income from 100% to 400% of the federal poverty line, and there is no repayment cap.
• COBRA and retiree coverage don't give you a Part B Special Enrollment Period, so sign up for Medicare during your Initial Enrollment Period.

What are your health insurance options if you retire before 65?

A Marketplace plan

HealthCare.gov says that if you retire before 65 and lose your job-based plan, you can buy a Marketplace plan. Losing that coverage qualifies you for a Special Enrollment Period outside annual Open Enrollment.

The Texas Department of Insurance (TDI) says individual and Marketplace plans can't deny you or charge you more for a preexisting condition. Premiums can vary by age, location, tobacco use, and whether the plan covers one person or a family. Our Texas Health Insurance Marketplace guide covers how plans are sold in Texas.

COBRA

COBRA generally applies to employers with 20 or more employees. It is generally offered for 18 months, and 36 months in some cases. Some states have mini-COBRA laws for smaller employers.

TDI says you have 60 days to decide whether you want COBRA, and you must tell your employer in writing. A TDI HMO notice says the 60 days run from the date you receive the written COBRA notice. The Employees Retirement System of Texas (ERS) gives Texas state employees 105 days. Check your own notice for your deadline.

Texas state continuation

Under Texas law, some group plans must continue coverage for 6 months after COBRA ends, for 24 months total for the employee. If you can't get COBRA, the plan may have to continue coverage for 9 months. Conditions apply:

• You must have been covered for the 3 months before the job ended.
• It does not apply to self-funded plans.
• You usually can't get it if you were fired.

Example: if you retire at 62 and your plan qualifies, 18 months of COBRA plus 6 months of state continuation could carry you to about 64.

A spouse's job-based plan

If your spouse still works, ask their employer whether you can join their plan and when. Keep one rule in mind. The IRS says you can't get the premium tax credit for any month you are eligible for affordable, minimum-value employer coverage, and that includes a spouse's employer plan under the family affordability test.

Retiree coverage from your employer

HealthCare.gov draws a line between being enrolled in retiree coverage and only being eligible for it:

• Enrolled in retiree coverage: You can't get premium tax credits on a Marketplace plan.
• Eligible but not enrolled: You may qualify for premium tax credits based on household size and income.
• Dropping retiree coverage on purpose: This does not give you a Special Enrollment Period. You must wait for the next Marketplace Open Enrollment Period.

Texas state employees and ERS

ERS says retirees who meet the Rule of 80 with at least 10 years of eligible service credit can keep GBP health insurance without a break if they retire directly from active employment. Benefits depend on legislative funding and can change.

State retirees who aren't eligible for GBP retiree coverage can use COBRA for up to 18 months. Those who meet the service criteria but turn 65 after COBRA ends can get Interim Insurance through HealthSelect of Texas until 65. ERS says Interim premiums are higher than COBRA, and you must choose COBRA first.

When can you sign up for a Marketplace plan after you retire?

For a retiree, the Special Enrollment Period runs from 60 days before to 60 days after your separation date. CMS says you can apply up to 60 days before your job-based coverage ends so there is no gap.

If you already lost coverage, Marketplace coverage can start the first of the month after you pick a plan. For example, if you enroll by May 31, coverage starts June 1. For more on these windows, see our guide to Special Enrollment Period qualifying life events.

COBRA vs. Marketplace: how do they compare?

CMS says being eligible for COBRA does not block a Special Enrollment Period or advance premium tax credits, as long as you decline COBRA or end it. For a broader look at job-loss choices, read health insurance after losing a job.

Can you drop COBRA and switch to a Marketplace plan anytime?

No. This is the deadline that catches many early retirees.

CMS says that even after you elect COBRA, you can still use your loss-of-coverage Special Enrollment Period until 60 days after losing your pre-COBRA job-based coverage. You may qualify for advance premium tax credits if you end COBRA by the time the Marketplace plan starts.

After that 60-day window, ending COBRA early does not create a Special Enrollment Period. HealthCare.gov says the Special Enrollment Period applies only when COBRA runs out. The other way out is Open Enrollment, when you may drop COBRA and replace it with a Marketplace plan.

How do premium tax credits work for early retirees in 2026 and later?

The income range is back

The IRS says that in general you can get the Premium Tax Credit if household income is at least 100% and no more than 400% of the federal poverty line. The temporary removal of the 400% cap applied only to tax years 2021 through 2025. Poverty-level figures change every year, so check the HealthCare.gov federal poverty level page for current numbers.

Retirement income counts

Household income for the credit is modified adjusted gross income (MAGI). It includes nontaxable Social Security benefits and tax-exempt interest. The IRS warns that lump-sum taxable IRA or retirement plan distributions and capital gains can significantly raise household income.

For example, a large IRA withdrawal late in the year could push your income up and shrink the credit you're allowed. Report income changes to the Marketplace promptly. A tax professional can help you plan withdrawals.

Settling up at tax time

You can use all, some, or none of your credit in advance each month. Using less can reduce the chance of owing money at tax time.

If you used advance payments, you must file a federal return with Form 8962, using Form 1095-A from the Marketplace. You repay any excess and get credit for any shortfall. For tax years after 2025, there is no repayment cap, so the whole difference is subtracted from your refund or added to the tax you owe. Our premium tax credit guide walks through reconciliation.

Can you get Medicaid in Texas between 60 and 64?

Usually not on income alone. Texas Health and Human Services Commission (HHSC) lists the groups Texas Medicaid serves: low-income children and their families, pregnant women, former foster youth, people with disabilities, and people 65 and older. Adults 60 to 64 would need a disability, a caretaker role, or another listed category.

Under 65, Medicaid for the Elderly and People with Disabilities requires that you receive Social Security or Railroad Retirement disability benefits, or that HHSC completes a disability determination.

HealthCare.gov adds two points. Below 138% of the federal poverty level, you may qualify for Medicaid only if your state expanded Medicaid. Below 100%, you probably won't qualify for Marketplace savings.

Are short-term health plans a safe bridge?

TDI says short-term policies give coverage for only a limited time, usually 6 to 12 months. Companies selling them can deny coverage or charge more for preexisting conditions, and they usually limit what they pay. Compare that with Marketplace plans, which can't deny you for a preexisting condition.

Can you use your HSA to pay premiums before 65?

Only in narrow cases. IRS Publication 969 says HSA funds generally can't pay insurance premiums. The exceptions are:

• Long-term care insurance
• Health care continuation coverage, such as COBRA
• Health coverage while you receive unemployment compensation
• Medicare and other coverage at 65 or older, but not Medigap premiums

Marketplace premiums paid while you are not on unemployment are not on the list. You can't contribute to an HSA once you're enrolled in Medicare, but the HSA stays with you after you leave work. Ask a tax professional how these rules apply to you.

How do you switch to Medicare at 65?

Know your Initial Enrollment Period

Your Medicare Initial Enrollment Period lasts 7 months. It starts 3 months before the month you turn 65, includes that month, and ends 3 months after. If you already get Social Security retirement or disability benefits, you're enrolled automatically when eligible. Otherwise, you sign up through Social Security. Our turning 65 Medicare checklist lays out each month.

End your Marketplace plan yourself

Marketplace coverage doesn't end automatically when Medicare starts. You must update your Marketplace application. You can report your Medicare start date up to 3 months ahead. For example, if Medicare starts May 1, you can update as early as February 1, and Marketplace coverage ends April 30.

You can't get Marketplace savings once you're eligible for premium-free Part A. If you keep using the tax credit after Medicare starts, you'll have to pay it back at tax time.

Don't wait on COBRA or retiree coverage

COBRA and retiree plans are not coverage based on current employment, so they don't give you the Part B Special Enrollment Period. If you delay Part B while on them, you may have to wait for the General Enrollment Period (January 1 to March 31) and pay a Part B late enrollment penalty for as long as you have Part B. See how the Part B late enrollment penalty is figured.

If you have COBRA and are eligible for Medicare but not enrolled, COBRA may pay only a small part of your care. COBRA will probably end once you sign up for Medicare. Medicare.gov says to sign up when you turn 65 and not wait for COBRA to end.

With retiree coverage, Medicare generally pays first. You may need both Part A and Part B to get full benefits from the retiree plan.

Special cases to plan for

A younger spouse on the Marketplace

When you update your application for Medicare, the change applies to you. HealthCare.gov says to then confirm the plan for household members who keep Marketplace coverage, such as a spouse who is still under 65.

Getting Medicare before 65

You may get Medicare earlier if you have a disability, End-Stage Renal Disease (ESRD), or ALS. People already getting Social Security disability benefits are enrolled automatically when eligible.

Open Enrollment dates don't match

TDI (updated March 31, 2026) lists Marketplace Open Enrollment as November 1 to December 15. HealthCare.gov pages still show November 1 to January 15. Don't rely on either set of dates. Check HealthCare.gov for the current window, and see our open enrollment dates guide.

Step-by-step timeline from retirement to 65

1. About 6 months before you retire: Ask your employer about retiree coverage and COBRA. If you're a Texas state employee, ask ERS whether you meet the Rule of 80. Estimate your household income for the year.
2. Up to 60 days before your last day: Apply for a Marketplace plan so coverage starts without a gap.
3. When your COBRA notice arrives: Note the election deadline in your notice and reply in writing if you choose COBRA.
4. Within 60 days after losing job-based coverage: Make your final choice. After this, leaving COBRA early won't open a Special Enrollment Period.
5. During each year: Report income changes to the Marketplace promptly.
6. Each tax season: File Form 8962 using your Form 1095-A.
7. Three months before your 65th birthday month: Your Initial Enrollment Period opens. Sign up through Social Security unless you're enrolled automatically.
8. Up to 3 months before Medicare starts: Report your Medicare start date to the Marketplace and confirm any spouse's plan.

Where can you get free help?

• HealthCare.gov Marketplace Call Center: 1-800-318-2596
• TDI Help Line: 800-252-3439
• State Health Insurance Assistance Program (SHIP): Find yours at shiphelp.org. Medicare.gov points people to their SHIP for help deciding about COBRA and Medicare.
• Benefits Coordination & Recovery Center: 1-855-798-2627 for COBRA and Medicare questions

A licensed agent can compare Marketplace plans now and Medicare options later. MeetBrokers is free to use, and every listed agent holds a state license that anyone can verify by National Producer Number. Profiles marked "unclaimed" come from public licensing records. Browse licensed health insurance agents in Texas or Medicare agents in Texas, or request help from an agent you choose. Your request goes only to that agent. MeetBrokers is not connected with or endorsed by the U.S. government or the federal Medicare program.